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Test your basic knowledge |
AP Microeconomics
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Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Incidence of Tax
Least-Cost Rule
Income Effect
Average Fixed Cost (AFC)
2. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Collusive oligopoly
Four-firm concentration ratio
Productive Efficiency
Total Product of Labor (TPL)
3. AFC = TFC/Q
Average Fixed Cost (AFC)
Marginal Resource Cost (MRC)
Inferior Goods
Monopolistic competition long-run equilibrium
4. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Break-even Point
Marginal Revenue Product (MRP)
Substitute Goods
Specialization
5. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Specialization
Private goods
Long Run
Law of Supply
6. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic
Incidence of Tax
Accounting Profit
Substitute Goods
Substitution Effect
7. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Economies of Scale
Variable inputs
Monopsonist
Profit Maximizing Resource Employment
8. Total product divided by labor employed. APL = TPL/L
Public goods
Luxury
Utility Maximizing Rule
Average Product of Labor (APL)
9. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply
Determinants of Supply
Incidence of Tax
Total Product of Labor (TPL)
Price discrimination
10. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Monopolistic competition
Total Fixed Costs (TFC)
Marginal Productivity Theory
Spillover costs
11. Ei = (%dQd good X)/(%d Income)
Incidence of Tax
Income Elasticity
Profit Maximizing Resource Employment
Economic Growth
12. The total quantity - or total output of a good produced at each quantity of labor employed
Public goods
Constrained Utility Maximization
Perfectly elastic
Total Product of Labor (TPL)
13. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Determinants of Labor Demand
Implicit costs
Free-Rider Problem
Market Economy (Capitalism)
14. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Free-Rider Problem
Marginal Revenue Product (MRP)
Inferior Goods
Break-even Point
15. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary
Excise Tax
Least-Cost Rule
Marginal Revenue Product (MRP)
Cross-Price Elasticity of Demand
16. A good for which higher income increases demand
Perfectly elastic
Normal Goods
Least-Cost Rule
Average Fixed Cost (AFC)
17. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good
Specialization
Monopsonist
Production function
Spillover costs
18. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Marginal Analysis
Price floor
Cross-Price Elasticity of Demand
Determinants of Demand
19. Product demand - productivity - prices of other resources - and complementary resources
Determinants of Labor Demand
Variable inputs
Perfectly elastic
Unit elastic demand
20. 0 < Ei < 1
Necessity
Natural Monopoly
Consumer surplus
Determinants of elasticity
21. The rational decision maker chooses an action if MB = MC
Marginal Analysis
Constant Returns to Scale
Price floor
Incidence of Tax
22. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Law of Demand
Monopolistic competition long-run equilibrium
Normal Goods
Determinants of elasticity
23. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Subsidy
Price floor
Scarcity
Substitution Effect
24. Es = (%dQs) / (%dPrice)
Cartel
Market Economy (Capitalism)
Private goods
Price Elasticity of Supply
25. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Price Elasticity of Supply
Market Economy (Capitalism)
Perfectly competitive long-run equilibrium
Average Variable Cost (AVC)
26. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Market Economy (Capitalism)
Negative externality
Normal Profit
Shortage
27. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Production function
Marginal Productivity Theory
Determinants of elasticity
Oligopoly
28. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Constant Returns to Scale
Utility Maximizing Rule
Income Elasticity
Perfect competition
29. TR = P * Qd
Total Revenue
Variable inputs
Short run
Economic Profit
30. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Positive externality
Shutdown Point
Perfectly competitive long-run equilibrium
Spillover benefits
31. The price of a good measured in units of currency
Absolute prices
Least-Cost Rule
Constant Returns to Scale
Surplus
32. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Monopolistic competition
Normal Profit
Dead Weight Loss
Price elastic demand
33. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Total variable costs (TVC)
Monopoly
Resources
Consumer surplus
34. The difference between total revenue and total explicit and implicit costs
Luxury
Total Product of Labor (TPL)
Economic Profit
Private goods
35. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Perfectly competitive long-run equilibrium
Monopoly long-run equilibrium
Producer surplus
Four-firm concentration ratio
36. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price
Spillover costs
Consumer surplus
Total Product of Labor (TPL)
Marginal Resource Cost (MRC)
37. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Long Run
Free-Rider Problem
Allocative Efficiency
Price discrimination
38. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Constant Returns to Scale
Non-collusive oligopoly
Monopolistic competition
Perfect competition
39. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Marginal Product of Labor (MPL)
Total Product of Labor (TPL)
Allocative Efficiency
Price Elasticity of Supply
40. A good for which higher income decreases demand
Inferior Goods
Marginal Product of Labor (MPL)
Demand for Labor
Incidence of Tax
41. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Dead Weight Loss
Total Product of Labor (TPL)
Perfect competition
Total Welfare
42. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Variable inputs
Complementary Goods
Determinants of Labor Demand
Luxury
43. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Public goods
Perfectly elastic
Marginal tax rate
Cartel
44. The additional cost incurred from the consumption of the next unit of a good or a service
Luxury
Spillover costs
Negative externality
Marginal Cost (MC)
45. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Monopoly
Marginal Productivity Theory
Derived Demand
Absolute prices
46. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Positive externality
Total Welfare
Constant cost industry
Income Elasticity
47. Models where firms agree to mutually improve their situation
Collusive oligopoly
Profit Maximizing Resource Employment
Income Elasticity
Least-Cost Rule
48. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Natural Monopoly
Average Variable Cost (AVC)
Market power
Price floor
49. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Determinants of Labor Demand
Necessity
Price elastic demand
Price Ceiling
50. A firm that has market power in the factor market (a wage-setter)
Allocative Efficiency
Production function
Monopsonist
Total Revenue